Buying a Condo With a Pending Lawsuit

Chris at Hauseit (https://www.hauseit.com) goes over the topic of buying a condo with a pending lawsuit, pros and cons of doing so and what the process might entail.

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Buying a condo with a pending lawsuit is necessarily always bad. For example, in some markets such as South Florida, it's very common to see Chapter 558 lawsuits in newer construction condo buildings, where the condo board sues the developer for alleged construction defects typically as soon as they take over the condo board from the developer.

Sometimes these can be serious defects that the developer really should remedy, but other times the alleged defects are immaterial and the HoA is really just trying to get some money in for the building's reserve fund.

You should ask the listing agent or the building's management for more information on the lawsuit, and often times not only will they point you to where you can find the court case online, but they'll also share with you the building inspection report that was done prior to the lawsuit being filed. Then you can see for yourself how serious the alleged defects are.

Another pro tip is to ask to see the building's chief engineer when you inspect the property again, so you can ask him or her in person what she thinks of the alleged construction defects.

Moreover, sometimes a condo board could be nearing the end of a lengthy lawsuit with say the developer, and could be nearing a big settlement win. In that case, there can be quite a bit of upside in buying a condo with a pending lawsuit especially if prices have been depressed because of the lawsuit. If the HoA wins a big settlement or lawsuit, then millions of dollars might flow into the building's reserve fund which can be used to pay for future repairs or even to lower everyone's monthly common charges.

Of course, on the flip side litigation isn't usually pleasant, and can be quite a negative factor when assessing a potential condo for purchase. That's because lawsuits always cost a lot in legal fees, which might result in years of special assessments for legal fees to pay for the cost of the litigation. This is especially not fun when it's the condo board being sued, meaning there's not even much upside to winning besides possibly legal fees being reimbursed by the losing party.

Some bad examples of litigation in the building might include residents suing the condo board for perceived mistreatment, negligence or even corruption. Or you might have the HoA in a lengthy lawsuit with a resident, suing them for not abiding by the building bylaws or refusing to pay their common charges (though this can sometimes be addressed with a common lien foreclosure).

Watch our video to learn more about the pros and cons of buying a condo with a pending lawsuit, and let us know your thoughts below!
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https://www.hauseit.com

Save money when buying, selling and renting real estate in New York and Florida with Hauseit (https://hauseit.com). Available in NYC, Long Island, the Hudson Valley and South Florida. Est 2014.

Hauseit Group LLC, Licensed Real Estate Corporation
Tel: (888) 494-8258 | https://www.hauseit.com
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